Income & Work

What Is an ESPP?

An employee stock purchase plan (ESPP) lets employees buy company shares through payroll deductions, often at a discount of up to 15% to the market price. Many plans use a lookback provision, basing the price on the lower of the share price at the start or the end of the offering period.

Example

With a 15% discount and a lookback, if the price is 40 at the start and 50 at purchase, shares are bought at 34 (85% of 40).

Taxes

Tax treatment depends on how long shares are held after purchase.

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🔗 Related Terms

Restricted Stock Units (RSU) Employee Stock Options Cost Basis Percentage Discount

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Last updated: September 29, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.